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The clean development mechanism versus international permit trading: the effect on technological change

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Abstract

The clean development mechanism of the Kyoto Protocol may induce technological change in developing countries. As an alternative to the clean development mechanism regime, developing countries may accept a (generous) cap on their own emissions, allow domestic producers to invest in new efficient technologies, and sell the excess emission permits on the international permit market. The purpose of this article is to show how the gains from investment, and hence the incentive to invest in new technology in developing countries, differ between the two alternative regimes. We show that the difference in the gains from investment depends on whether the producers in developing countries face competitive or noncompetitive output markets, whether the investment affects fixed or variable production costs, and whether producers can reduce emissions through means other than investing in new technology.

Suggested Citation

  • Cathrine Hagem, 2007. "The clean development mechanism versus international permit trading: the effect on technological change," Discussion Papers 521, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:521
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    1. Cathrine Hagem, 2002. "A Note on The Kyoto Protocol, Tradeable Quotas and Firm Survival," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(3), pages 467-468, July.
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    Cited by:

    1. Strand, Jon, 2011. "Carbon offsets with endogenous environmental policy," Energy Economics, Elsevier, vol. 33(2), pages 371-378, March.
    2. Klepper, Gernot, 2011. "The future of the European Emission Trading System and the Clean Development Mechanism in a post-Kyoto world," Energy Economics, Elsevier, vol. 33(4), pages 687-698, July.
    3. Imai, Kenichi, 2015. "Assessing the Effects of Kyoto Mechanisms on the Diffusion of Climate Change Mitigation Technologies," AGI Working Paper Series 2015-15, Asian Growth Research Institute.
    4. Strand, Jon & Rosendahl, Knut Einar, 2012. "Global emissions effects of CDM projects with relative baselines," Resource and Energy Economics, Elsevier, vol. 34(4), pages 533-548.

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    More about this item

    Keywords

    Climate Policy; Technology Adoption; Emission Trading; Clean Development Mechanism; Technological Change; Cournot Competition;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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